Big government loan helped save Corner Brook newsprint mill, but owners not making payments

A large loan from the Newfoundland and Labrador government in 2014 helped save the struggling newsprint mill in Corner Brook, but the owners have not made a payment for years, and the balance is swelling as interest accumulates, CBC News has learned.

Moreover, Kruger Inc. — the Montreal-based parent company of Corner Brook Pulp and Paper Ltd. — is refusing to comment on why its debt is now greater than the day the loan was first issued. 

According to the province's 2022-23 public accounts — the government's audited year-end financial statements — Corner Brook Pulp and Paper owed the provincial treasury just over $117 million as of March 31.

The outstanding balance is more than the original $110-million loan approved nine years ago by a Progressive Conservative government led by then-premier Tom Marshall, who was a Corner Brook-area MHA.

According to the terms of the loan, the company is required to make quarterly loan payments of $1.85 million. The first payment was due March 31, 2019, with full repayment expected by 2033.

In response to a series of questions, however, Finance Department officials confirmed that the newsprint mill's owner made just three payments on the loan. All were in 2019.

The current rate of interest on the loan is 4.55 per cent, so the balance is now $117.2 million, and growing.

Province mum so far on details of debt

Government officials have not explained why the company stopped making payments. They have also not addressed whether any action has been taken to try to recover the money, or enforce the terms of the loan.

The loan is secured by a mortgage over the company's power assets, including Deer Lake Power and the Watson's Brook power plant, and the company's water rights. The province has agreed to purchase the power plants and water rights at fair market value if the mill closes, less any money owing to the province.

In a statement issued Thursday, Finance Minister Siobhan Coady said the province has not triggered a default on the loan because the company is struggling. She said talks with Corner Brook Pulp and Paper are ongoing.

As for Kruger, company spokesman Jean Majeau said in an email the company "will not comment" on the outstanding loan.

The revelation emerges as the newsprint mill is in the midst of a weeklong stoppage in production to carry out maintenance and amid challenging market conditions. The mill employs roughly 300 workers and contributed $50 million to the provincial economy in 2020, according to Statistics Canada.

In addition to the loan, the provincial government has invested $70 million into Corner Brook Pulp & Paper since 2010 for various agreements and initiatives, Finance Department officials said.

And in 2017, the province provided a guarantee up to $88 million related to the company's pension plan deficit.

Under the terms of the agreement, if the government is required to pay the guarantee, the amount would be deducted from the purchase price of the power plants and water rights.

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